Posting for

Monday, November 2, 1998

by: Bert Rush

brush@firstam.com

REVERSE MORTGAGES/COMPETENCY AND CAPACITY/ESCROW AND CLOSING

An article in the Wall Street Journal on 10/15/98 reports yet another class action filed against a major originator of reverse mortgages: Transamerica Corp.

This is the second such class action we've heard about in recent years--the first, against Commonwealth Life Insurance Co., was reportedly settled last June with Commonwealth agreeing to pay $5 million to 1,500 homeowners. Assuming this figure does not include attorneys' fees, that averages $3,333 per homeowner. Both class actions have been filed in the San Francisco Bay Area.

To view this article you may click on the URL below:

It seems that abusive practices in connection with these programs persist, so we too should persist in requiring that sign-ups for reverse mortgages to be insured by First American be done before notaries known by us to be aware of the risks peculiar to these programs. Mainly, these risks are that the borrowers may not understand the terms of the program and may later claim to have been lacking legal capacity (due to mental incompetency or physical illness or weakness) when they signed--or that their heirs will assert such claims after the borrower is deceased or truly incapacitated.

And there's also the risk--albeit more remote--that one of our branches or agents will handle a sufficient number of these transactions for a particular lender to be named with the lender in a class action lawsuit. Yack!

Most of these programs continue to offer a good alternative to senior homeowners (62 and older) with fixed income but lots of equity. It's the abusive few we need to be careful around.

A great primer/resource is Ken Scholen's "Reverse Mortgages for Beginners," available from the National Center for Home Equity Conversion, 7373 147 Street, #115, Apple Valley, MN 55124, (612) 953-4474, fax (612) 953-3230, e-mail www.reverse.org. The price is $14.95.

Scholen's book is a valuable resource for escrow/closing and title folk (as well as consumers) since it explains how to identify loan counselors and lenders who have earned the seal of approval of the National Center for Home Equity Conversion--a rating recommended by the American Assn. of Retired Persons (or is it People? I lost my membership card...). Look into it.

Questions, comments, argument? Just press the "reply" button and send your thoughts to LandSakes.

**********

Following last Monday's posting, Richard Flory (Santa Ana) writes:

The Home Office Underwriting Department has three copies of " Reverse Mortgages for Beginners " which are available for loan.

If you would like to review one of the copies E-mail me a note and I will send the book as availability allows. E-mail me at: rflory@firstam.com